NEW YORK, Aug 28 (Reuters) - Oil markets were roiled on Monday after Tropical Storm Harvey wreaked havoc along the U.S. Gulf Coast over the weekend, hitting the heart of the U.S. oil and gas industry.

The U.S. dollar dropped to its lowest in roughly 16 months against a basket of major currencies and a more than 2-1/2-year low against the euro, following comments from central bankers on Friday and worries over the storm hurting the U.S. economy.

Harvey made landfall in Texas late on Friday as the most powerful hurricane to hit the region in more than 50 years and caused large-scale flooding.

Those floods forced refineries in the area to close, which sent U.S. gasoline prices soaring. Spot prices for U.S. gasoline futures surged 7 percent to a peak of $1.7799 per gallon, before easing to $1.7253.

“Global refining margins are going to stay very strong,” said Olivier Jakob, managing director of Petromatrix.

“If (U.S.) refineries shut down for more than a week, Asia will need to run at a higher level, because there’s no spare capacity in Europe.”

In turn, U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude.

Brent crude was down 1.6 percent at $51.55 a barrel, while U.S. crude was down 3.4 percent at $46.26.

In the U.S. equity market, the Dow and the S&P were little changed in late morning trading as losses in insurance and oil stocks were offset by gains in shares of health and home improvement retail chains as investors assessed the impact of the storm.

“We’re looking at this as more of a shorter term phenomenon and the energy stocks have held in relatively well,” said Matt Miskin, market strategist at John Hancock Investments.

“The market is not seeing that as a significant move but we’ll have to see how the dynamics play out over the course of the week.”

The Dow Jones Industrial Average fell 18.75 points, or 0.09 percent, to 21,794.92, the S&P 500 gained 0.21 points, or 0.01 percent, to 2,443.26 and the Nasdaq Composite added 20.97 points, or 0.33 percent, to 6,286.62.

European shares fell as the euro strengthened after European Central Bank chief Mario Draghi did not express concern about a strong currency in a closely watched speech. d

MSCI’s world index, which tracks shares in 46 countries, was up just 0.08 percent.

The U.S. dollar extended its weakness from last week.

“In general, what you’re seeing is a consistent tone of dollar weakness,” said Kathy Lien, managing director at BK Asset Management in New York.

“The disappointment from (U.S. Federal Reserve Chair Janet) Yellen at Jackson Hole on Friday has carried over to trading this week,” Lien said, referring to the fact that Yellen did not address monetary policy at a recent summit of central bankers in Wyoming. The impact of Harvey was also weighing slightly on the greenback, she added.

The dollar index, which tracks the greenback against six major currencies, was down 0.51 percent at 92.269, after earlier falling to 92.252, its lowest since May 2016.

U.S. Treasuries were steady as market participants waited on data that will culminate in Friday’s August employment report for further indications of the strength of the U.S. economy.

The weaker dollar helped gold rise to its highest in more than a week.

Additional reporting by Sam Forgione in New York, Sruthi
Shankar and Tanya Agrawal in Bengaluru and Ahmad Ghaddar in
London; Editing by Bernadette Baum